Idaho Becomes 3rd State to Reject Batus Bid for Farmers

Citing the public interest of state residents, Idaho Insurance Director Anthony J. Fagiano on Tuesday disapproved a $4.35-billion hostile takeover bid for Farmers Group by Batus Inc.

Idaho became the third state to disapprove the deal. California and Oregon rejected the proposed acquisition of the Los Angeles-based insurance holding company on June 17 and July 14, respectively. Arizona approved it on June 3. Still reviewing the Batus bid are five other states in which Farmers subsidiaries have headquarters.

Fagiano ruled that if Batus bought Farmers, Batus might close the insurer’s regional office in Pocatello, Ida., with a “potential adverse impact” upon the economy of southeastern Idaho. He also found that Batus might oblige Farmers to stop offering medical malpractice liability insurance to Idaho hospitals.

Batus, the U.S. arm of London-based BAT Industries, has said repeatedly that it has no intention to close the Pocatello office or end hospital coverage. But according to an Idaho insurance department statement, “their commitment contained significant reservations in the director’s view.”

Batus spokesman Wilson W. Wyatt said the company would seek to allay both of Fagiano’s concerns.

Farmers Chairman Leo E. Denlea Jr. said in a statement that “this underscores the belief we’ve held from the beginning that this hostile bid would face serious regulatory obstacles.”

Donald Borge, president of Farmers Insurance Co. of Idaho, testified at department hearings seven weeks ago that Farmers employs about 400 people and has 150 agents in Idaho. Farmers is Idaho’s largest home and auto insurer and is California’s second largest.

Fagiano announced his decision after the close of stock trading on Tuesday. Farmers shares closed at $51, a $1.50 drop on heavy over-the-counter trading of 835,500 shares.